Nigeria’s first potentially significant gold mine is moving ever closer to a production decision.
According to Segun Lawson, the chief executive of Thor Explorations Ltd (CVE:THX), a definitive feasibility study is already underway to fine-tune the economic potential of the Segilola mine in south-western Nigeria, just a couple of hundred kilometres away from Lagos.
READ: Thor Explorations "extremely encouraged" by first set of drilling results at the Segilola gold project
In global terms, Segilola isn’t that big. The plan is to produce around 81,000 ounces of gold per year during the first three years of production, and as it stands currently, production will drop away to 47,000 ounces per year in the four years after that.
But for Nigeria, which is an economy almost entirely built on oil, it’s significant. And for Thor Explorations, as first-mover inside a new and potentially lucrative mining jurisdiction, there’s plenty of other opportunity. Already the company is snapping up new ground in anticipation of success and Segilola.
But that said, the focus still remains firmly on completing economic feasibility work and then putting together the US$75mln or so that will be needed to get the mine built.
There’s already plenty to go on.
A preliminary feasibility study put out by Thor in September of last year made the case for development pretty strongly. According to the study, Segilola has a post-tax net present value (5%) of US$138mln at a US$1,250 gold price and will deliver a post-tax internal rate of return of 53%.
Payback is likely to take 1.8 years.
The plan as it stands is to build a plant capable of processing 500,000 tonnes of ore per year, consisting of the conventional crushing circuit, with grinding, carbon-in-leach, elution, electrowinning and smelting all combining to produce the standard gold dore.
This production plan is based around an existing reserve of 448,000 ounces of gold grading 4.2 grams per tonne within a 556,000 ounce indicated resource grading 4.3 grams and supported by a further inferred resource of 305,000 ounces grading 4.7 grams.
The likely all-in sustaining costs are estimated at US$682 per ounce, which should allow for plenty of margin against the current gold price, still holding at above US$1,300 per ounce.
A recent C$4.2mln funding should take the company comfortably through its definitive feasibility work, and into the full-blown capital raise.
At the moment there aren’t any major institutions on the register, but Lawson plans to change all that.
“The plan is to get out and market to institutions,” he says. Indeed, he got off to a flyer earlier this year when Thor Explorations won the ‘Best Emerging Miner’ award at the Mining Indaba in Cape Town.
But what’s really likely to raise interest is the upcoming newsflow. Investors have already had a taste in the company’s most recent release. Ongoing drilling has returned intercepts as high as 5.9 metres at 16.3 grams per tonne and 5.5 metres at 30.1 grams.
The aim of this drilling is to increase the average head grade from the current 4.2 grams, in itself already a healthy number. Resources will also be moved up from the inferred category into indicated, making it possible to include them in the mine plan.
But further will work will have a different aim.
“There’s exploration potential at depth and on strike,” says Lawson.
The likelihood is that Segilola could have an underground component and work on modelling that is already underway.
So it’s altogether possible that by the time Thor turns its thoughts seriously to raising construction capital, the project parameters will be significantly improved.
In the meantime, work continues on the company’s exploration programme in nearby Senegal. But there’s no doubt that the attention of investors will at least for the immediate future, be firmly fixed on Segilola.